Introduction
The Home Depot is a U.S. based home improvement supplies Company and is mainly engaged in selling construction products, tools, and services. The industry to which company belongs is retailing. It operates vast box format stores in all 50 states of the United States, all the ten provinces of Canada and Mexico. The total numbers of stores that the company operates are 2,247. The company was established in 1978 by Bernard Marcus, Arthur Blank and Pat Farrah in Marietta, Georgia, United States. The headquarters of the company are located at Cobb County, Georgia, United States. Craig Menear is the Chairman and CEO of the company. The primary products of the company are Home appliances, flooring, paint, building materials, tools, garden supplies, and plants. Interline Brands is the subsidiary of Home Depot. The company employs more than 371,000 employees. The company is a segment of Dow Jones Industrial Average and S&P 500. The ticker symbol of the company is HD. The slogan of the company is More Saving. Additional Doing. The official website of the company is www.homedepot.com.
Income Statement Over the Last 3 Years (Annual Report, 2019, 2018, 2017)
|
Nestle Balance Sheet For Fiscal Years 2013, 2017 & 2018 |
| ($ millions) ($ millions) ($ millions) |
| 2017 2018 2019 |
| Assets Current assets |
|
Cash and cash equivalents 6,415 7,448 4,884 |
|
Short-term investments 638 1,433 921 |
|
Inventories 8,382 9,172 8,153 |
|
Trade and other receivables 12,206 13,459 12,252 |
|
Prepayments and accrued income 762 565 583 |
|
Derivative assets 230 400 337 |
|
Current income tax assets 1,151 908 874 |
|
Assets held for sale 282 576 1,430 |
|
Total current assets 30,066 33,961 29,434 |
| Non-current assets |
|
Property, plant and equipment 26,895 28,421 26,576 |
|
Goodwill 31,039 34,557 32,772 |
|
Intangilbe assets 12,673 19,800 19,236 |
|
Investments in associates and joint ventures 12,315 8,649 8,675 |
|
Financial assets 4,550 5,493 5,419 |
|
employee benefits assets 537 383 109 |
|
current income tax assets 124 128 128 |
|
deferred tax assets 2,243 2,058 1,643 |
|
Total non-current assets 90,376 99,489 94,558 |
|
TOTAL ASSETS 120,442 133,450 123,992 |
| Liabilities and Equity Current liabilities |
|
Financial debt 11,380 8,810 9,629 |
|
Trade and other payables 16,072 17,437 17,038 |
|
Accruals and deferred income 3,185 3,759 3,673 |
|
Provisions 523 695 564 |
|
Derivative liabilities 381 757 1,021 |
|
Current income tax liabilities 1,276 1,264 1,124 |
| Liabilities directly associated with assets held for sale 100 173 272 |
| Total current liabilities 32,917 32,895 33,321 |
| Non-current liabilities |
|
Financial debt 10,363 12,396 11,601 |
|
Employee benefits liabilities 6,279 8,081 7,691 |
|
Provisions 2,714 3,161 2,601 |
|
Deferred tax liabilities 2,643 3,191 3,063 |
|
Other payables 1,387 1,842 1,729 |
|
Total non-current liabilities 23,386 28,671 26,685 |
| Equity |
|
Share capital 322 322 319 |
|
Treasury shares 2,196 3,918 7,489 |
|
Translation reserve 20,811 17,255 21,129 |
|
Retained earnings and other reserves 85,260 90,981 90,637 |
|
Non-controlling interests 1,564 1,754 1,648 |
|
Total equity 64,139 71,884 63,986 |
| TOTAL LIABILITIES AND EQUITY 120,442 133,450 123,992 |
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Analysis of Trends
Liquidity Ratios
The ratio of the company declined from 1.42 in 2017 to 1.36 in 2018. Be that as it may, during the year 2019, there was no change in current ratio, and the ratio remained 1.36. It indicates a decrease in the effectiveness of the company is paying its present liabilities from its existing assets. Also, the working capital of the company declined during the year 2018 and stood at $4,033 million as compared to $4,530 million during the year 2017. The working capital stood at $4,467 during the year, showing an increase of $434 million. It indicates a superior position of the company in maintaining its business operations (Agarwal, 2019). The acid-test ratio of the company kept below for the three years under analysis. The ratio stood at 0.31 during the year 2017 and declined to 0.28 during the year 2018. During the year 2019, the ratio improved again and stood at 0.33. The ratio during the last three years indicates wastefulness of the company is paying off its short term obligations from its present liabilities.
The inventory turnover has significantly improved and stood at 5.09 times during the year 2019 as compared to 4.72 during the year 2017. It shows improved effectiveness of the company in the management of inventory. Otherwise, the asset turnover ratio has indicated an increasing pattern. The ratio for the year 2017 stood at 1.93, which subsequently increased to 2.07 in 2018 and 2.15 in 2019. Also, the obligation ratio makes a comparison between total debts and the full value of the company (Timgarrison, 2013). The lower ratio implies increasingly financial stability of the business. The ratio of the company has shown an increasing pattern and is alarming. Ratio for the year stood at 2.24 during the year 2017 and increased to 3.29 during the year 2018. Further, the ratio increased to 5.74 during the year 2019. The ratio of the company is too high and indicates that the company is top on debts (Leung, 2018). Subsequently, the obligation ratio of the company has shown an increasing pattern which is not a decent signal. The ratio for the year 2017 was 0.69, which increased to 0.77 in 2018 and subsequently increased to 0.85 during the year 2019. The increase in ratio indicates an increase in liabilities of the companies as compared to its total assets.
Profit Margin and Profit Margin Ratios
The ratio for 2017 was 11.63% which improved to 12.59% in 2018. Further, the ratio increased to 13.30% during the year 2019. It indicates that a higher percentage of the total income of the company was changed over into profits during 2019 as compared to 2018 and 2017. Profit margin ratio stood at 6.83% during the year 2017 and increased to 7.63% during 2018. The ratio further increased to 7.92% during the year 2019. It indicates a consistent increase in the profit margin of the company (Marcial, 2019). Otherwise, return on asset ratio increased from 13.20% during 2017 to 15.77% during 2018 and further increased to 16.99% during the year 2019. It indicates a higher and ideal utilization of total assets for generating a net gain. Profit for value ratio for the year 2017 stood at 0.43 and increased to 0.68 during the year 2018. During the year 2019, the ratio increased to 1.11. It indicates higher utilization of the stockholder's value in generating total compensation.
References
Annual Report (2019, 2018, 2017). Retrieved from: http://ir.homedepot.com/financial-reports/sec- Filings
Agarwal, S. (July, 2019). Rising Retail Sales Show Good Signs For Home Depot, Lowe's, Autozone. Retrieved from: http://www.forbes.com/sites/shreyaagarwal/2019/07/15/rising-retail-sales-show-good-signs-for-home-depot-lowes-autozone/#6d1521243c57
Leung, S. (Nov, 2018). Efficient Vs. Sufficient: How to Improve Key Profitability Ratios. Retrieved from: h ttps://www.salesforce.com/blog/2018/11/improve-key-profitability-r atios.html
Marcial, G. (June, 2019). Home Depot: A Stock Shelter From Brexit's Impact. Retrieved from: h ttp://www.forbes.com/sites/genemarcial/2019/06/29/home-depot-a-stock-shelter-from-b rexits-impact/#15853d759279
Timgarrison (April 22, 2013) 5 Ways To Improve Your Liquidity Ratios. Retrieved from: h ttp://www.thecontrollershipgroup.com/2013/04/5-ways-to-improve-your-liquidity-r atios/
